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08 September 2006

Woolly thinking in supermarket dispute

Woolworths Australia, the new owners of Progressive supermarkets, wasted little time after their take-over last year of the country's second largest supermarket chain to shake things up. Local suppliers were told to give the company bigger margins and larger promotional contributions, as part of a move to standardise Woolworths' terms of trade on both sides of the Tasman.

In return, Woolworths offered its NZ-based suppliers access to all its Australian supermarkets - an offer which few have found attractive because of the costs of servicing a much larger and intensely competitive marketplace.

Worse still, because Progressive's Australian suppliers have been offered the same access to this side of the Tasman, NZ-only suppliers could find themselves squeezed off local shelves if they can't better the prices of Aussie-based competitors.

It's a tactic which appears to have worked.

Attempts by New Zealand suppliers to change Progressive's mind have been unsuccessful. Most are terrified of going public for fear of losing access to 44% of the country's supermarket shelves. And an attempt by a group of them to get the Commerce Commission to revisit its decision to allow Woolworths Australia to buy Progressive has also failed.

The company says its June quarter sales in its New Zealand supermarkets were up 4% on the same quarter last year. It also claims an increase in market share.

Having out-muscled their suppliers, Progressive's new owners have taken on the union movement.  

The dispute went public a fortnight ago when National Distribution Union secretary Laila Harré took Progressive's warehouse workers out on strike to get a nationwide employment agreement - a move which most observers saw as Quixotic. Did she really imagine that families on the breadline could out-muscle a trans-Tasman business with sales of $A36.7 billion?

However, as the dispute has evolved it has become less about money and more about workers' rights. This makes it a matter of union principle which can also be portrayed to the public as a matter of fair play.

Now, as unions on both sides of the Tasman start to line up behind Harré's workers, the dynamics of the dispute are changing. Indeed, some observers believe it has the potential to become a tipping point which influences the context of industrial relations in New Zealand for some time to come.

By refusing to budge on what is now an indefinite lock-out, Progressive is increasingly being seen publicly as a big ugly corporate forcing low-income workers into submission. Certainly that is the picture that Harré is consistently painting.

At the same time Progressive is making other employers feel increasingly vulnerable. The last thing business owners want when employment is at a 20-year low and company profits are generally strong, is a reawakening of union muscle.

Progressive's new owners understand muscle - it's a tactic which they've favoured ahead of negotiation since their arrival in New Zealand. But muscle must be used very carefully when you are big and foreign and your dispute is in the public domain. It's an arena where Harré, the former Alliance MP, holds a handful of aces.

It's too early to predict an outcome. But the first objective in a communications plan for the company should have been to portray the company and its customers as the victims. This, Progressive has spectacularly failed to do.

It's time they hired a new strategist.

- Trevor Walton

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